Light Reading

Ericsson Goes Beyond Telecom with MetraTech Acquisition

Sarah Thomas
7/29/2014
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Ericsson's acquisition of MetraTech, announced Tuesday, is all about strengthening its billing support -- but not for its existing telecom OSS/BSS services. Rather, it's looking to break into new markets such as transport, utilities, and the Internet of Things (IoT), and to support its telco customers that are vying to do the same. (See Ericsson Acquires Billing Vendor MetraTech.)

Ericsson AB (Nasdaq: ERIC) is already a big name in telco OSS/BSS with a converged platform that supports both prepaid and postpaid billing, but where it has yet to make inroads thus far is in the burgeoning IoT market. That's where MetraTech Corp. comes into play.

The Boston-based billing specialist was formed in 1998 to provide metadata-based billing, commerce, and settlement platforms for a broad range of industries spanning 150 countries. The company, which raised $30 million in 2012, counts telcos such as Verizon Communications Inc. (NYSE: VZ) and BT Group plc (NYSE: BT; London: BTA) amongst its customer base, but it has had the most success in multi-vertical industries.

"This is not a telecom play; this is a multi-vertical play going forward," says Heavy Reading analyst Ari Banerjee. "It's helping Ericsson's service provider customers achieve that goal of being multi-vertical and becoming an Internet of Things player...This is how Ericsson is enabling the whole value chain."

For its part, Ericsson says MetraTech will deepen its expertise in billing as well as expand its geographic presence in the US. The Swedish giant has been talking up a "Networked Society" comprising countless connected devices, all of which will require new, personalized business models, often involving multiple partners. They don't follow the traditional telecom data models, and Banerjee says Ericsson needed a platform that was much more agile and cost effective.

"There's huge growth potential, but the revenue is minimal in M2M," he says, adding that revenues are only around 2 to 3% today. "When it comes to buying software systems to support that business model, [operators] won't put in a lot of money. They need something targeted towards the need, but also cost effective."


Light Reading recently caught up with Ericsson's Head of Networks Johan Wibergh. Find the interview Q&A here.


Ericsson has been building up its OSS/BSS business through M&A for awhile now. During the past few years it has acquired Telcordia and ConceptWave to help it become one of the biggest SPIT vendors in the industry. It has since launched a cloud OSS to support operator virtualization strategies and inked billing deals with carriers such as T-Mobile US Inc. . IoT represents the next step. (See Ericsson Launches Cloud OSS, T-Mobile Swaps Out Amdocs BSS for Ericsson , Ericsson Buys More OSS Smarts, and Leading Lights Finalists 2014: Outstanding OSS/BSS Vendor.)

The financial terms of the acquisition were not announced, but all 140 of MetraTech's employees and contractors will be joining Ericsson when the deal closes, expected before the end of the third quarter this year.

— Sarah Reedy, Senior Editor, Light Reading

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SachinEE
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SachinEE,
User Rank: Light Sabre
7/31/2014 | 6:21:27 AM
The bigger picture
Ericsson's acquisition of Metra Tech is a great thing. They are looking to venture into new markets like transport and the internet of things. It might seem bleak now but looking at the aftermath of this venture, we find that the opening up of the IoT lab in Boston will enable some industries such as M-health the support they need not to mention that it will optimize communication networks so its no doubt a worthwhile venture.
SachinEE
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SachinEE,
User Rank: Light Sabre
7/30/2014 | 2:39:29 PM
Re: Boston
On second thought, considering the fact that Ericsson as a company is itself headquartered in Boston, the idea of setting up an IoT innovation lab should not really come as a surprise. Maybe, just maybe, it may be a slight indicator to the fact that Ericsson may have more up their sleeves with this move than they are letting on. No conspiracy theory, just pure speculation.
SachinEE
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SachinEE,
User Rank: Light Sabre
7/30/2014 | 2:38:52 PM
Re: Innovation Lab coming to Boston?
I would have thought that if an exclusive IoT lab was to be set up anywhere within the United States then it would most probably have been set up in the Silicon Valley area or somewhere in California close to that. As a keen follower and participant in the IoT movement I believe that this would be the best place considering how interdependent the various ends of IoT are. But all the same, this is great for Boston.
thebulk
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thebulk,
User Rank: Light Sabre
7/30/2014 | 5:31:18 AM
Re: Innovation Lab coming to Boston?
If they really are goign to open up an IoT lab in the Boston area that will be pretty big, but not that shocking, right now Boston seems to be setting itself apart from other cites as an IoT power house. 
RitchBlasi
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RitchBlasi,
User Rank: Light Sabre
7/29/2014 | 3:58:50 PM
OSS/BSS for IoT
Definitely a need to go out of the box, per se, for this kind of billing.  Flexibility is required if IoT reality is to match the hype.  I look at mHealth as an fragmented industry that could use this kind of support.  Looking at fitness and wellness, not specifically at healthcare, the case can already be made for requiring a platform like this to manage data, billing, etc. across multiple industries.
SReedy
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SReedy,
User Rank: Blogger
7/29/2014 | 2:19:23 PM
Innovation Lab coming to Boston?
I just spoke with MetraTech CEO Scott Swartz, who hinted that Ericsson has big plans for Boston, where it's headquartered. He said they "view Boston as one of the areas in which they would like to stimulate innovation. We are a piece of that." Sounds like they are going to be opening an IoT innovation lab there in the future.

 
SReedy
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SReedy,
User Rank: Blogger
7/29/2014 | 2:18:09 PM
Re: Ericsson's POV
I think transportation will be a big one too. It already is for most network operators, but MetraTech has a big business there too. It does the billing for O'Hare and London's tube.
jasonmeyers
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jasonmeyers,
User Rank: Blogger
7/29/2014 | 2:02:34 PM
Re: Ericsson's POV
Interesting - Ericsson was already focused on helping utilities optimize their communications networks and make their operations more intelligent, so hopefully this wiil help bolster that effort. 
SReedy
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SReedy,
User Rank: Blogger
7/29/2014 | 12:51:34 PM
Ericsson's POV
A bit more color from Ericsson, essentially confirming that it's filling a gap in its OSS/BSS offering and looking to expand into IoT -- Petter Jartby, Head of Solution AreaBSS, writes in an email to LR:

"This acquisition sees Ericsson addressing a major emerging market opportunity that a wide range of verticals have as billions of connected devices come on line. From transportation to utilities, there will be a mass of valuable data collected and delivered to power new services, form new partnerships and enter new markets. To successfully serve this market, Ericsson needed a billing solution that is adaptable to the demanding requirements of the XaaS and IoT economy. To be sure, while this acquisition helps us further expand into new markets, it also positions us to help our telecom customers do the same."
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